Gas storage development in a low-carbon energy world: Underground gas storage, today and tomorrow

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1 Annual Conference, Vienna, June 24-25, 2010 Gas storage development in a low-carbon energy world: Underground gas storage, today and tomorrow Hans-Peter Floren CEO, E.ON Gas Storage GmbH Vice-President, Gas Storage Europe 1

2 Contents I. Introduction II. Market challenges & the role of gas storage III. Storage for new technologies IV. Conclusions 2

We are facing a global challenge Growing world population is driving energy demand and is predicted to increase greenhouse gas emissions Increase in CO 2 emissions by regions

3 We are facing a global challenge Growing world population is driving energy demand and is predicted to increase greenhouse gas emissions Increase in CO 2 emissions by regions until 2030 (billion tonnes) China OECD States India Middle East and North Africa today 2030 How can gas storage contribute to meeting the challenge? 3

4 Contents I. Introduction II. Market challenges & the role of gas storage III. Storage for new technologies IV. Conclusions 4

EU target 2020: 20 % reduction of greenhouse gases Increase in energy efficiency Reduction of primary energy consumption by 20% until 2020 Increase of cogeneration plants and local and district

5 EU target 2020: 20 % reduction of greenhouse gases Increase in energy efficiency Reduction of primary energy consumption by 20% until 2020 Increase of cogeneration plants and local and district heating Energy labelling Buildings Directive II Increase in renewables Minimum of 20% share of energy consumption in 2020 Promotion of wind, solar, bio fuels, biomass 20 % renewables 20 % reduction of greenhouse gas emissions Sustainability 20 % efficiency improvements 5

6 Natural gas particularly suited to reducing emissions CO 2 formed by combustion of fossil fuels (kg CO2/kWh fuel input) 0.40 lignite 0.33 hard coal 0.28 heavy fuel oil 0.26 gas oil 0.20 natural gas Key facts Fossil fuels are still required to meet world's energy demand in the future: share of natural gas increasing Natural gas has the lowest carbon content of all fossil fuels. Extended use of gas in existing and new application areas helps to achieve a reduction in CO 2 emissions. Natural gas goes renewable Integration of biomethane leads to further CO 2 reductions 6

7 Rising demand for natural gas can be met by supplies however, European import reliance and thus transport distances will increase Development of natural gas supplies in the EU MTOE % 10% 24% 19% 37% 470 (-520) 6% 11% 10% 29% 16% 24% 525 (-560) 5% 10% 9% 28% 15% 20% future projects advanced projects other non-eu imports Algeria Russia Norway domestic production Domestic production is expected to fall by over 40% in 2020: Import ratio >72% Growing need for imports and locations of gas reserves lead to more long-distance/baseload gas transportation. Inevitably stronger integration into global gas developments Supply security will need to be actively managed. Increase in gas storage demand 7

Are we prepared to face the rising demand? Europe can develop enough storage capacity to secure supplies Working gas in bcm 1-4 4 UK 2 F 12 0.1 1 0.6-2 0.4 2 (+3)** NL B 0.4 1 DK D I 20 4 3.2 4.

8 Are we prepared to face the rising demand? Europe can develop enough storage capacity to secure supplies Working gas in bcm UK 2 F (+3)** NL B DK D I PL 3 3 CZ A SK HU 0.3 -? 2 3 RO LV 82*** OECD Europe * potential projects under assessment S Capacity 2009 Build-up until 2012 (under construction) Build-up (planned) Demand forecast until 2025 (EU OECD) * GSE publication 01/2009: up to plus 60 bcm planned until 2015; ie. nearly doubling of the 2006 capacities ** NL: ~3 bcm exempted for production purposes *** as of July 2009 GSE Storage Map 8

9 Market challenges and the role of gas storage Gas storage enables growth & penetration of low-carbon power generation Gas storage removes reliance on coal/oil for peak generation security Local storage helps to manage temporary supply chain disruptions and LNG transit times Secure energy supplies Reduce greenhouse gas emissions Sustainability Energy affordability Gas storage allows for optimisation of gas purchase decisions Utilising expertise in natural gas storage to store other gases (CCS, energy storage ) Gas storage protects customers from excessive short-term market price volatility 9

10 Contents I. Introduction II. Market challenges & the role of gas storage III. Storage for new technologies IV. Conclusions 10

11 The energy system will need more flexibility to accommodate the increasing share of renewable energies Share of fluctuating renewable energy is increasing Additional smart grids D Energy storage (power/gas/hydrogen) Base load from conventional sources Additional peak supply from gas power plants 11

12 P 4HC 2H 4HC Different concepts with underground storage CH 4 (optional) 2H C UGS C CAES P T H2CH 4 Gas grid (optional) I 12

13 Concept of Compressed Air Energy Storage (CAES and A-CAES) Wind Power Compressed Air Power grid turbine elect. compression +20% Efficiency is around 50%, heat storage improves efficiency to 70% 13

14 Why underground storage? Underground energy storage is proven technology, provides quickly high power rates over several hours, has little impact on the environment, complements regionally with pumped hydro, Energy storage is a prerequisite for the development of renewable energies, has a market: 80 TWh would be the European demand for adiabatic CAES, assuming 100% renewable energies and an optimum extension of the grid

15 Carbon Capture and Storage (CCS) Carbon Capture (1) and Transport (2) and permanent Storage (3) in deep porous rock reservoirs in depths of more than 1,000 m Coal-fired power plant with CCS technology or other industrial source 15

16 CO 2 storage provides climate protection security of supply a bridging technology modern infrastructure export of technology international energy policy 16

17 Contents I. Introduction II. Market challenges & the role of gas storage III. Storage for new technologies IV. Conclusions 17

Conclusions Global Challenge I: Increasing import dependency Global increase in demand and competition for

Global Challenge II: Meeting climate protection targets Decrease of conventional and growth in renewable

renewables. By adding biomethane, natural gas goes renewable.

18 Conclusions Global Challenge I: Increasing import dependency Global increase in demand and competition for natural gas: Gas storage facilities are needed to structure and secure imports. Global Challenge II: Meeting climate protection targets Decrease of conventional and growth in renewable power will increase the demand for flexible power supply and drive the need to use natural gas and advanced gas storage technologies. Power from natural gas will be of increasing importance Natural gas can already be combined effectively with renewables. By adding biomethane, natural gas goes renewable. The integration of biomethane leads to further significant reductions of CO 2 emissions. Underground storage for new technologies A-CAES competes against pump storage, flexible gas power plants, and management of the demand side. CCS can help to clean up conventionals. 18

World Energy Outlook Dr. Fatih Birol IEA Chief Economist Riyadh, 12 January 2010

World Energy Outlook Dr. Fatih Birol IEA Chief Economist Riyadh, 12 January 2010 World Energy Outlook 29 Dr. Fatih Birol IEA Chief Economist Riyadh, 12 January 21 Change in primary energy demand in the Reference Scenario, 27-23 Coal Oil Gas Nuclear OECD Non-OECD Hydro Biomass Other